On Tuesday, USDA’s Economic Research Service (ERS) updated its Food Price Outlook for 2015.
ERS stated that, “The all-items Consumer Price Index (CPI), a measure of economy-wide inflation, fell 0.5 percent from December to January and is 0.1 percent below the January 2014 level.”
More specifically, Tuesday’s update noted that, “Looking ahead to 2015, ERS predicts that supermarket (food-at-home) prices will see normal to slightly-lower-than-average food price inflation, increasing 2.0 to 3.0 percent. Meat prices will likely continue to experience the effects of the Texas/Oklahoma drought, as farmers’ decisions on calving and herd sizes are felt down the line due to the 6-to 18-month production process. Additionally, the effects of Porcine Epidemic Diarrhea virus (PEDv) on the hog industry will be transmitted to meat prices in the immediate future. This forecast is based on an assumption of normal weather conditions; however, severe weather events could potentially drive up food prices beyond the current forecasts. In particular, the ongoing drought in California could have large and lasting effects on fruit, vegetable, dairy, and egg prices. Conversely, if oil prices continue to fall or remain low throughout 2015, subsequent decreases in production and transportation costs may be passed on to the retail level.”
With respect to pork, ERS pointed out that, “However, there are some signs of industry expansion as the effects of PEDv are subsiding; hog prices in 2015 are expected to fall 26 percent below 2014 figures. ERS now predicts pork prices to rise 1.5 to 2.5 percent in 2015.”
In addition, ERS indicated that, “Beef and veal prices continued to rise, increasing 0.1 percent from December to January and 19 percent year-over-year. Prices remain high, as the U.S. cattle inventory recovers from historically low levels. While recent rains in the Southern Plains and Southwest have improved pasture conditions somewhat, the drought still continues throughout these regions. In addition, improved crop yields allow cattle producers to feed cattle longer and to hold cattle for herd expansion. Many producers are holding on to their inventory to increase live weights, as steer and heifer prices have hit record highs. Most retail beef prices, on average, are also at record highs, even after adjusting for inflation. ERS predicts beef and veal prices will increase 5.0 to 6.0 percent in 2015.”
Tuesday’s update also stated that, “Egg prices decreased 3.3 percent from December to January but are 8.2 percent above January 2014 levels. Retail egg prices are among the most volatile retail food prices. Additionally, prices typically fall in the first quarter of the year, after a spike in the fourth quarter due to increased demand for eggs in holiday baking. There is also concern that the new law affecting eggs sold in California (Proposition 2) will affect retail egg prices across the country. While this may cause higher prices in California, prices elsewhere may face downward pressure if out-of-State egg producers choose not to alter their facilities and look elsewhere within the U.S. to sell their eggs. ERS expects egg prices to increase 2.5 to 3.5 percent in 2015.”